Schalk Venter. Picture: SUPPLIED
Schalk Venter. Picture: SUPPLIED

Afrox MD Schalk Venter has called on the government to reduce uncertainty about mining legislation, land reform and state-owned enterprises as it seeks to pull the economy out of a recession.

Venter, head of Sub-Saharan Africa’s largest industrial gases company, joins a growing group of executives agitating for policy certainty in key sectors.

He was commenting on President Cyril Ramaphosa and finance minister Nhlanhla Nene’s optimism about getting the country out of the recession. Venter wants the government to act over factors stifling investment and pushing the economy to the edge.

"Optimism is one thing. The key thing is what the government is doing around the mining legislation, state-owned enterprises and land reform. There must be policy certainty," Venter said on Monday.

Tepid economic growth has put key sectors on the back foot, forcing companies to reduce costs and cut expenses. Afrox’s Hard Goods business — which services the mining, iron and steel, and manufacturing sectors — reported reduced volumes in the six months to June.

In light of the low economic growth, inflation and fuel price hikes, the company’s priority was to drive down costs and improve efficiency, Venter said.

He said the two quarters of negative economic growth in the first six months of the year hit Hard Goods, the revenue of which was down from the previous R341m to R330m.

Afrox has attributed the decrease to lower activity in the SA mining sector and lower production in manufacturing.

"We experienced a reduction in volumes in welding, gas equipment and [the] self-rescue business pack business area, which were all negatively impacted by the continued downturn in mining, iron and steel and manufacturing," Afrox said.

Venter was upbeat about the company’s prospects after it recently won a R1bn contract to supply all gases to SA hospitals for the next five years.

In the six months to June, the company’s gross profit after distribution expenses increased 6.7% to R913m, while headline earnings per share were up 11.5% to 104c, compared with 93.3c in the corresponding period in 2017.

The Atmospheric Gases and LPG businesses increased revenue 2.7% and 10.6%, respectively. But Hard Goods reported a 3.2% fall in revenue, which Afrox attributed to lower volumes from key markets especially mining and automotive. Revenue from the Emerging Africa business was up 1.4%.

Afrox declared an interim dividend of 52c per share, up 13% from a year ago.

Venter said the company had over the past four years experienced reduced LPG output from the country’s crude oil refineries. LPG is a by-product of the crude oil refining process.

"In this period, we sold 72,000 tons of LPG across [the Southern African Development Community]. Of that, 30% were imports. Four years ago, that was 5%," he said.

Afrox shares were up 1.74% to R29.30 on Monday.

njobenis@businesslive.co.za

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